I don’t have many friends, but the few that I do have are quite special. Recently I’ve noticed that two of them have grown jaded with our political system, seeing no solution to the problem of corruption caused by cash from special interests, corporations and billionaires. They have lost all hope that we can contain the influence of a privileged few over the many, and are dropping out of political discourse. Another took issue with my criticism of the Occupy Wall Street movement, stating he thought I was offering the simple solution that hosing down the encampments and sending the kids fleeing back to their dorm rooms would make things better. He wanted a better solution, one that involved listening to the other side, recognizing and even acting on the common ground between the two. I pointed out that I didn’t think life would be better without liberals; I consider myself a reformed one but continue to hold many of its values like universal human rights, concern for the environment, and racial equality. The only difference is how I want to achieve those goals. For example, I want to see environmentalists buying land to protect endangered animals or plants instead of using the federal government to limit the land owner’s property rights. Similarly, I might share some of the same opinions about corporate bailouts, student loan debt, and corruption in politics as liberals but I disagree with their solutions.
Every year Transparency International ranks corruption in the world’s countries, and will soon be releasing its report for 2011. The 2010 report had Denmark, New Zealand and Singapore topping the index as the least corrupt countries, with the United States ranked 22, tied with Belgium behind Chile and the UK. While the top tier of “clean” countries is dominated by small countries like Finland and Canada, both Germany and Japan rank higher than the United States. Having studied Japanese politics over the years I completely disagree with their optimistic assessment of that country, but I believe that overall the index does paint a fairly accurate picture of corruption in the world.
Being ranked 22nd may seem bad, but it is much easier to govern a small country such as New Zealand, population 4.3m, than it is the United States, population 300m. Large countries don’t appear in the survey until Germany at #15, population 81.8m, so the US is at least in the top tier of the least corrupt countries. The purpose of this comparison is not to undermine the argument that the United States has a corruption problem; it does, but it is not as bad as thought, or not bad enough that people can’t do anything about it. At least we have mechanisms in place that allow us to fight corruption, including a free press, an independent judiciary, and divisions between the legislative and executive branches of government. China, ranked 78th, has none of these.
The problem is that all of these elements that insure a free and fair society are under siege. Academia, a monoculture of elitist ideals, threatens the free press by its certification of the professional journalist. Prior to the 1960’s journalists entered the profession through the military or by applying to work for a newspaper then working their way up. It also impacts the judiciary through the indoctrination of lawyers in undergrad and law school who then become future jurists. The judiciary is also undermined manipulated by the Executive branch through the Department of Justice. The legislative and executive branches are manipulated by the need to raise ever larger sums of money to attain or stay in power. These branches then manipulate the government to reward supporters, punish enemies – just two of the hallmarks of corruption.
So if we want to root out corruption, where do we start?
There is a reason behind the name Transparency International. The enemy of corruption is exposure, and that is why a free press is critical to the achieving of a virtuous government. While most mainstream journalists are blinded by the indoctrination in journalism school, some are asking questions and seeing problems in a new light. The Internet has created an Army of Davids to use Glenn Reynolds’s term, whereby everyone with a cell phone camera and an Internet connection can upload stories that challenge and undermine the status quo. A politician or a cop can easily deny ever taking a bribe or acting illegally, but a video can expose the deceit in a way that words cannot.
Transparency can also be achieved through legislation. As a long-time supporter of Herman Cain for president, I will admit that I don’t fully appreciate his 9-9-9 Plan. I do recognize that its simplicity, however, is what makes it truly revolutionary for our time. Along with that simplicity comes a level of transparency in our everyday economic lives that most Americans have never seen.
Take for example payroll taxes. Most Americans receiving paychecks from an employer see deductions taken out for social security (6.2%) and Medicare (1.45%). What they don’t see is their employer’s side of FICA, another 7.65% that it pays to the government to employ you.
So what exactly is your compensation? An employee may believe his gross salary is $x, but his or her total compensation is really $x+7.62% including the employer’s FICA contribution. Now a worker might think that since the employer pays that, it’s not really his. But when the employer looks at the bottom line, it will look at total employee compensation which includes not only the 7.62% contribution but the value of fringe benefits such as health and dental insurance. Before hiring an employee, a employer usually budgets for the spot and that budget includes expected salary, the employer’s FICA contribution, as well as additional costs of the benefits package. Some of these benefits provide the employer with tax advantages that the employee doesn’t benefit from. The bottom line is that an employee doesn’t know how much he his being compensated, and an employer cannot easily determine how much an employee will cost.
This is exactly the type of scenario Cain’s 9-9-9 plan would simplify. An employee would be paid a salary which the employee would then be able to use to purchase benefits such as health care. This would decouple health insurance from employers since employers would not enjoy tax benefits for providing access to insurance. The cost of health insurance would be up front, and the employee would be able to buy the plan that suited him. If he’s young and single, a cheap catastrophic plan might be best for him. If he is older and has a family, more expensive full coverage might be more to his liking. The employee would then pay 9% of her salary to the government, which is 1.35% more than is currently taken out of her check but much less than the 15.3% she is already paying, half of which is hidden from her.
Simplicity and transparency go hand in hand. It is much easier for a company like GE to pay less taxes than you did last year when the tax code runs 70,000 pages and cannot be understood by anyone. If it had to pay 9% on its earnings it wouldn’t need platoons of tax accountants to comb through the 70,000 pages looking for every possible deduction. How much did it earn? $100 billion? Cut a check to Uncle Sam for $9 billion. It also wouldn’t need to spend money paying off congressmen to create GE-specific loopholes in that 70,000 pages. And next year when Transparency International conducts its survey, maybe the United States rises a notch or two.
This is one example of how we can improve the system that no one likes – whether it’s the Tea Partiers like me angry at Congress and the Obama Administration’s bailout of Wall Street, or the hippies stoned in the streets pissed off at the same thing. The important thing to remember is to not lose hope and give in to apathy. There are solutions, and they are not easy ones. But we need to begin to think grand again; we need to think “big.” These are immense problems and we can never completely solve them, but we can make things better for our society if we open our minds to new ideas like a flat tax or Herman Cain’s 9-9-9. If there are better ideas than Cain’s, let’s find them. If 70,000 pages of tax code become an edifice of bureaucratic inertia, let’s destroy it. But we shouldn’t throw our arms in the air and give up because that is exactly not what our country needs right now. It needs courage and conviction at a level we haven’t seen in awhile but that haven’t disappeared and are still there. What Tom Wolfe wrote years ago about Americans still rings true today, “Americans are childish in many ways and about as subtle as a Wimpy burger; but in the long run it doesn’t make any difference. They just turn on the power.” It’s time to turn on the power.